What's In Store For Liberty Media (LMCA) In Q2 Earnings?

The Liberty Media Group (NASDAQ:LMCA) is scheduled to report second-quarter 2016 results on Aug 5, before the opening bell.

Last quarter, the company posted a negative earnings surprise of 40.00%. Moreover, the company’s earnings lagged the Zacks Consensus Estimate in three of the previous four quarters, with an average miss of 47.73%. Let’s see how things are shaping up for this announcement.

Factors at Play

Liberty Media is steadily restructuring its operations with an aim to control several subscription-based businesses. The company’s diversified investments in cable MSOs, satellite radio broadcasters and live concert operators should enhance its long-term growth prospects. The company holds a majority stake in satellite radio broadcaster, SIRIUS XM Radio, 27% in Live Nation Entertainment, the largest concert promoter and ticketing company in the U.S., and 27.3% in Charter Communications Inc. (NASDAQ:CHTR) , the second largest cable MSO in the U.S. after Comcast Corp. (NASDAQ:CMCSA) .

However, stiff competition from pay-TV operators and the company’s susceptibility to rapid technological changes are dampeners. Liberty Media's high dependence on subscription-based services, which are vulnerable to economic fluctuations, might dent profits. The multi-channel video market in the U.S. is also saturated. The company also has a highly leveraged balance sheet, which is a major concern.

Earnings Whispers

Our proven model does not conclusively show that Liberty Media is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Liberty Media has an earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 47 cents.

Zacks Rank: Liberty Media has a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stock to Consider

Here is a company to consider instead as our model shows that it has the right combination of elements to post an earnings beat this quarter.

CenturyLink Inc. (NYSE:CTL) , with an earnings ESP of +5.09% and a Zacks Rank #2.